NACH Mandate

NACH mandate is a convenient solution for recurring payments by allowing you to automate them. As such, you need not worry about missing the deadlines whether for loan EMIs, utility bills or insurance premium payments. Established by the National Payments Corporation of India (NPCI), NACH, or the National Automated Clearing House, allows convenient and quick electronic transfers of funds. 

It is a central system that helps strengthen the local and regional ECS (Electronic Clearing Service) systems that were previously used for bulk transactions. With NACH, banks across the country can carry out a large number of electronic fund transfers. As a bank account holder, you can authorise payments to be deducted directly from your account using the NACH e-mandate.

There are two types of NACH mandates that facilitate the electronic transfer of funds:

• NACH Debit

NACH debit simplifies the payment collection of recurring financial obligations such as loan EMIs, utility bills, insurance premiums, PF contributions, etc. It automatically deducts payments through a large number of customers’ accounts. It also allows organisations to track these transactions easily through online channels.

• NACH Credit

NACH credit allows businesses to make sizeable payments directly into the bank accounts of a large pool of beneficiaries. A unit controls the high-value transactions done through a single system. Corporates and other large organisations can leverage the NACH credit facility to distribute salaries, interest, etc.

e-NACH and e-mandate are simply services that aid both customers and merchants in handling recurring payments. While both deliver the same results, they are slightly different in their structure.

The e-NACH is facilitated by NPCI, which covers more than 40+ banks. On the other hand, e-mandates are managed by individual banks and are available for only a handful of them. 

To opt for e-NACH, you need to fill up an online form on your bank’s website. It will go to NPCI via a sponsor bank and then get approved or rejected by the issuing bank. For an e-mandate, you can set it up directly by completing a one-time transaction for authorisation on the merchant’s website.

Now that you know the meaning of the NACH mandate and types, here are its objectives:

• Create a centralised system for multiple ECS systems

• Provide a technologically advanced platform to conduct a large number of recurring payments

• Support Aadhaar-based and mobile-based ACH transactions

• Reduce the risk of missed payments and the associated penalties

• Regulate a smooth regulatory environment for institutions

• Improve relationships with financial institutions

Here are the features and benefits associated with the NACH Mandate:

To avail of NACH services, follow these quick steps:

1. Visit the bank’s website and opt to fill out the NACH mandate form

2. Once you have filled in the details, you will get redirected to the destination bank’s website Here, you must authenticate your request using your net banking credentials

The bank would then verify the account number and decide whether to accept or reject it. If accepted, the mandate gets confirmed and future transactions can be scheduled. You would receive a reference number known as the UMRN.

ECS functions as a system that allows electronic credit and debit transactions from your account at regular intervals. While this may seem similar to the offerings of NACH, there are some major differences between the two: